Tariffs Threaten Chinese OEM Growth Potential

Chinese electric vehicle (EV) makers are facing increasing challenges to their efforts to access global markets, as key existing and potential markets start to throw up tariff barriers.

The United States closed its borders to Chinese EVs before they even hit US highways, imposing total tariffs amounting to a rate of 102.5%, despite extremely low levels of imports. Canada, with its tight ties to the US auto sector, also reportedly is considering new tariffs, while Washington assesses the possibility that Chinese OEMs might try to circumvent US tariffs by shifting production to Mexico to take advantage of the US-Mexico-Canada (USMCA) free trade agreement.

Further, the European Union (EU) imposed an at least 17.4% tariff on top of the existing 10%, taking the top rate to 38.1%. Turkey is also getting in on the act, taxing imports of both EVs and internal combustion engine (ICE) vehicles at 40%.

Chinese government support exceeds $230 billion.

The common theme among these tariff-taking countries is the perception that Chinese EV OEMs have enjoyed unfair support from the country’s government to develop the EV sector. Scott Kennedy, senior adviser and trustee chair in Chinese Business and Economics at the Center for Strategic and International Studies (CSIS), estimates that from 2009 to 2023, Chinese government support cumulatively totaled $230.8 billion through nationally approved buyer rebates, exemption from the 10% sales tax, government funding for infrastructure (primarily charging poles), R&D programs for EV makers, and government procurement of EVs.